Thursday, October 27, 2011

Yudof’s Salary Plan: What does it Really Mean?

In August, President Yudof announced a plan for merit increases for non-represented staff making less than $200,000 and for faculty who have been deemed meritorious. The initial idea was to reward people who have not gotten raises during the last few years. Yudof also wants to give the campuses the ability to stop other universities from stealing UC faculty; however, this plan is full of unanswered questions.

Coupled with the new merit-based 3% salary increase, we find a new policy that will allow faculty to use grant money and other external sources of income to increase their base salaries. A good discussion of this plan can be found at Remaking the University, but it is important to stress that in reality, there are four main ways that people in the UC get increased compensation: across the board salary increases, merit pay, special compensation pools, and negotiated compensation. During the last few years, some represented employees have gotten salary increases, while many other employees have continued to receive merit increases. Furthermore, the medical centers and other units have developed their own special compensation pools, while non-represented faculty and administrators have continued to get renegotiated compensation deals.

In fact, except for across the board salary increases, most of the compensation increases are handled on the campuses on an ad hoc basis, and it does not look like this system is changing. Moreover, in the current move to let the campuses keep all of their revenue, it is unclear what Yudof’s salary plan means. Is the Office of the President going to distribute state funds to the campuses in a special merit pool, or is the idea to simply instruct the campuses to allow staff and faculty to compete for a share of their local revenue?

If we look at the facts on the ground, we discover that professors and administrators often get their compensation increases through private negotiations. As the past Academic Council Chair Dan Simmons wrote a few years back in his study, “The Death of the UC Salary Scales,": "At least one campus has provided off-scale salaries to 100 percent of its new faculty appointments. Some campuses are utilizing devices to broadly provide off-scale enhancements to faculty in order to regularize the salary inversions that result from hiring new faculty with off-scale salaries exceeding the compensation of full professors. One or more campuses utilize a shadow salary scale to reflect market level compensation.” In other words, many--if not most--of the non-represented faculty do not get their raises through merit reviews or movements up the salary scale; instead, increases are negotiated through private deals between professors and administrators. In fact, Simmons pointed out that 85% of the professors are being paid off of the official salary scale.

As Simmons argued, the current system has many flaws: “The evolution of a system that compensates faculty who are newly appointed, or who threaten to leave and are retained with off-scale salary increments, replaces the historic peer reviewed compensation system with a system that is individually negotiated with campus administrators who have the discretion to grant or deny a salary increment. A step IV professor in one place is no longer on the same playing field as a step IV professor in another place, perhaps as close as across the hall in the same department. Indeed, the step IV professor might discover that his or her new colleague recently hired as an assistant professor is earning a higher salary.” Not only are some new faculty getting higher pay than faculty members who have been teaching for several years, but the off-scale system circumvents the merit review and peer review process. It also creates collusion between individual faculty members and administrators.

As I have pointed out before, the end result of the current system is incredible inequality within the professorial ranks, with some faculty members getting $40,000 raises and some getting nothing. While we have been told that the faculty senates have been working on this problem, there is no evidence that a new system and culture has been implemented. In fact, the Office of the President has been pushing a market-based system that Simmons previously critiqued in the following way: “The market approach to setting individual salaries says several things to a faculty member who has loyally done his or her job and progressed through the salary ranks on a regular basis. First, you are a fool for not having sought to move elsewhere with a higher salary in order to negotiate an off-scale at home. Not only are you a fool, your work must be worth less than the person across the hall newly hired with an off-scale that is higher. Second, the first thing you should do is look for an appointment at another university. The position might be more attractive in any event than working in a place that does not appreciate your efforts. Third, the University must be more interested in bringing in new superstars with expensive start up packages than maintaining the loyalty of its current faculty base.” Thus, in order to compete with private universities for professors and administrators, the university is forced to renegotiate salaries in a secretive and individualized manner. In this system, certain people are deemed market worthy, while others see their wages stagnate.

By arguing in his letter that the new pool of money should be used to recruit and retain faculty who are being “courted by competing institutions,” Yudof is signaling to the campuses that they should continue to negotiate secret deals with their stars and potential stars. While some may prosper from this system, many will actually see their compensation go down as they pay more for healthcare and pension. However, since everyone wants to be a star, no one will rock the boat, and the majority will suffer. Like our national economy, wealth inequality grows because the majority of people think they will profit from a system that screws them.

Thursday, October 20, 2011

UC Announces New Pension Rates

At the next UC Regents meeting, the Office of the President will ask the Regents to endorse new pension contribution rates. According to this proposal, starting in July 2013, current employees will pay 6.5% of their salary into UCRS, and the UC will put in 12%. For people hired on or after July 1 2013, they will pay 7%, while the UC will pay 12%. Of course, these changes will have to be negotiated for represented employees.

One interesting aspect of this is that the university has decided to contribute 12% for the people in both the new and old plan. This means that while people in the new plan will receive a reduced benefit, the university does not have an immediate incentive to fire current workers and replace them with new hires, which often happens when a new pension tier requires a lower employer contribution. However, over time, the people in the new system will cost the university less.

Ultimately, new hires will be paying more and getting less, and this inequality will help to reduce the university’s long-term liability. Moreover, for the next three years, much of the increased contributions from employees may be matched with new salary increases, and so the university will not increase its revenue from these changes. In fact, the move to a 12% employer contribution coupled with a 3% salary increase this year and a possible additional 3% next year will mean that the UC will see its compensation costs increase by 11% in the next two years (the UC currently contributes 5% to the pension plan). The long-term plan is to increase the employer contribution by 1% each year until they reach 16%.

Once the UC starts paying 16% of covered compensation, it will cost the university over $1 billion a year to fund the normal cost of the pension plan. Furthermore, the UC still has to deal with escalating retiree healthcare costs and the fact that the state still does not contribute to the pension plan. I predict that the university will seek savings by continuing to shift more of the cost for healthcare and retiree healthcare to the employees. Without a significant change to recent healthcare legislation, workers inside and outside of the university will continue to see their total compensation decrease.

Monday, October 10, 2011

UC-AFT Goes to Wall Street: OCCUPY and Demand

I am going to the Occupy Wall Street protests this weekend, and I hope to circulate a list of demands that a wide variety of groups and individuals can endorse. Here is my list of what many of us want:

1. A federal works program to employ 10 million people in construction, community service, education, and green technology

2. Allow all underwater homeowners to refinance mortgages based on current home values.

3. Prosecute bankers and investors involved in fraudulent loans and related derivatives.

4. Prosecute people who authorized or committed torture.

5. A federal investment in green technologies and research.

6. A community service program so college students can forgive their loans.

7. The end to police intimidation of protesters.

8. A tax system that makes the wealthy pay their fair share and a tax for financial transactions.

9. A commitment to fight climate change.

10. A withdrawal from Afghanistan and Iraq.

11. A freeze of healthcare premiums.

12. Protect Social Security, Medicare, and Medicaid.

13. Support the right to unionize.

14. A new campaign finance reform.

While the media complains that the amorphous protests have no single theme, it may be possible to organize around a set of common demands. I will report back on my return.

Wednesday, October 5, 2011

From Obama to Vanity Fair: Telling the Wrong Story

A recent Vanity Fair article, “ California and Bust,” by Michael Lewis attempts to blame the difficult financial status of many states and municipalities on the costs of public pensions. The following passage is either the result of bad editing or ideological bias: “A prison guard who started his career at the age of 45 could retire after five years with a pension that very nearly equaled his former salary.” As a commenter writes in response to this claim, “What formula is Mr. Lewis using to arrive at this statement? The 3% @50 formula is the top formula used in California and if a Guard made 150,000.00 a year as the base salary used in calculating the pension it would work out as: 150,000 x 3% x 5 years = 22,500.00 annual pension. Please. This is far from the "very nearly equaled his former salary".” Of course this correction is buried in the comments section, and will not be seen by anyone who reads the article in print.

While Lewis’ article appears to be a balanced, neutral expose on our fiscal crisis, it spends virtually no time discussing how pensions were devastated by the crash of the stock market in 2008-09 and how states and local governments have been undermined by the loss of tax revenue related to the collapse of the housing bubble and the crash of the markets. Like so many other stories discussing our economic situation, there is no attempt to explain how illegal mortgages coupled with dangerous financial derivatives resulted in the loss of millions of jobs and trillions of dollars of wealth.

Since the President and other leaders have failed to explain to the American people how our economy has been ravaged by financial speculation, people now believe that the cause of our problems are pensions, benefits, public employees, and unions. Moreover, due to the fact that the President did not make the culprits of our financial woes pay for their misdeeds, he helped to fuel the displacement of blame onto victims of the financial collapse.

Like Obama’s decision not to prosecute the perpetrators of our torture regime, the failure to hold big banks and investors responsible results in a lack of “moral hazard,” which means there is no penalty for destructive behavior. With no one else to blame, the Right produced a populist Tea Party that blamed big government instead of too-big-too fail banks.

Since the President knows that he has to raise $1 billion to run for office, and his Republican adversaries face the same issue, no one wants to step on the toes of guilty investors. In a more rational world, we would see arrests and huge fines, and we would also see the move to tax investment profits at the same rate as earned income, Ina rational world, we would also see a financial transaction tax to slow the pace of our global casino. Yet, instead, we get empty rhetoric and talk about deficit reductions and debt limits.

Let’s hope that the Occupy Wall Street actions turn into an effective national movements that tells the right story and provides the right solutions.

Monday, October 3, 2011

OccupyLA Update

On October 2, 2011, John Bruning the UC-AFT Field Representative for UCLA, filed the following report:

I went to the OccupyLA march to City Hall on Saturday morning, not really sure what to expect. There was a wide variety of people there: progressives, libertarians, "Anonymous" types, socialists, anarchists, students, vets, older folks, etc.

Nearing the end of the second day, we're still working through decision-making processes, goals, other structures, and next steps. It's a very collective process, which means that it's a very slow process, but it's also meaningful and it keeps power decentralized.

We've overcome a few challenges so far and survived one night of "illegally" sleeping on the City Hall lawn. But we still have practical challenges to overcome for the movement to grow.

First is education. There are a few of us with backgrounds in organizing and direct action, but the vast majority are new to activism and don't know what to do. There's been a lot of sitting around for the past few days, but there's movement to start holding workshops and skillshares soon.

Second is action. Everyone here wants to do SOMETHING. There was an action today at the Metro station, but it suffered from a lack of planning. We are looking into ways to most effectively plug ReFund CA and OccupyLA together, and the Thursday action at the downtown LA Bank of America is already being discussed here.

Finally, many people are trying to figure out how to take OccupyLA out of the park and expand into other communities. There has been talk of more public occupations around the metro area, and also reaching out to the rest of the 99% who can't be here, through workplace and community organizing.

I have to go to the General Assembly now, but it's very exciting and there's a lot of energy here, and the next few days will be critical to see if this movement continues in LA and what form and direction it will take.